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What Netflix and Amazon Pricing Tell Us about Rate Design’s Future

Deck:

Alexa, Pull Up My Energy Service Subscription Plan!

Byline:

Lon Huber and Richard Bachmeier

Author Bio:

Lon Huber is a director currently leading Navigant’s North American retail regulatory offering. He has previously led advances in time-varying rate design, RPS modernization, distributed energy resource compensation and ownership, energy storage and community solar.

Richard Bachmeier is a manager in pricing and analytics at Tucson Electric Power Company with expertise in utility regulation, ratemaking and resource planning, power marketing and pricing, and competitive energy markets.

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America is becoming a nation of subscribers. Blue Apron, Netflix, Verizon, Amazon; the list of subscription services goes on. Even Lyft is offering a new subscription service with unlimited rides for a fixed monthly fee.

The subscription e-commerce market has grown by more than a hundred percent a year over the past five years. The largest retailers are generating more than 2.6 billion dollars in sales in 2016, up from 57 million dollars in 2011.

This growth is fueled by consumer interests in convenience, control, choice, and comfort. Subscriptions are especially surging among the twenty-five to forty-four-year-old demographic, whose annual incomes range from fifty thousand to a hundred thousand dollars. If other industries are transitioning from a pay-per-use and volumetric model to a subscription model, why should utilities not consider this option as well?

Technology unlocked this subscription revolution by providing new ways for customers to acquire products and services, particularly on e-commerce platforms. The energy sector is also affected by these innovations.

At the same time, the sector is experiencing its own share of new energy service technologies that can further unleash innovation, such as advanced meters, smart thermostats, distributed generation, and digital apps. It is now time to leverage this technology and give customers the option to access a new pricing platform for their energy needs.

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